Nonlinear Option Pricing

Chapter 2

Monte Carlo

Mathematicians are like the French: You tell them something,

they put it into their own language, and then it means something

completely different.

— Goethe

In the perspective of numerics, the Feynman-Kac theorem that we recalled in

Chapter 1 allows us to switch from finite difference scheme methods to Monte

Carlo implementations. Monte Carlo is more efficient with a high number

of underlyings, because it hardly depends on the dimension of the problem

while the computational time of finite difference methods grows exponentially

with the number of variables. In this chapter, we briefly recall the prin-

ciple of the Monte Carlo method and